The Wall Street Journal-20080116-Oil Hits a Three-Week Low- Weak Retail Sales Lead to Concerns Of Slowing Demand
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Oil Hits a Three-Week Low; Weak Retail Sales Lead to Concerns Of Slowing Demand
Crude-oil prices slumped to a three-week low yesterday after U.S. retail sales came in weaker than expected, sparking more concern about slowing oil demand.
The poor sales figures exacerbated worries that the U.S., the world's biggest energy consumer, is headed for recession, and led to the seventh fall in oil prices in the nine sessions since Jan. 2, when prices first touched $100 a barrel.
Light, sweet crude for February delivery on the New York Mercantile Exchange fell $2.30, or 2.4%, to $91.90 a barrel, the lowest settlement for a front-month contract since Dec. 20. Prices hit an intraday record $100.09 a barrel Jan. 3.
December retail sales fell by 0.4%, said the Commerce Department, which also released downward revisions to sales figures from October and November. The December figures compared with expectations of a 0.1% drop, according to a Dow Jones Newswires survey of analysts. The results suggest the housing slump and higher energy prices caught up with consumers during the critical holiday shopping season.
The oil market's reaction yesterday to weak economic data represented a shift from its behavior in late 2007, when traders would often bid crude higher on the increased chance of further U.S. rate cuts, which weaken the dollar and are also seen as positive for crude demand.
"The retail sales data spells more bad news for the economy and is outweighing the weaker dollar" and chances of further interest-rate cuts, said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.
Also yesterday, President Bush, who is visiting Riyadh, told reporters that he hopes "OPEC nations put more supply on the market" and warned of high energy prices damaging consuming economies. The statements were made before a meeting with Saudi Arabia's King Abdullah.
Saudi Arabia's oil minister, Ali Naimi, responded by saying the kingdom, which is the world's biggest oil exporter and the Organization of Petroleum Exporting Countries' de facto leader, would raise production when the market justifies it.
While this represents no change in OPEC's usual line, the cartel is due to meet Feb. 1 in Vienna, and Bush's three-day visit to Saudi Arabia could put pressure on the kingdom.
"Bush's public call for more OPEC oil raised the possibility of increased supply," said Tim Evans, an analyst at Citigroup in New York.
In other commodity markets:
GOLD: Prices settled weaker as profit-taking weighed on prices after a recent rally on safe-haven buying as investors seek a stable investment in times of economic uncertainty. January gold on the Comex division of Nymex fell 60 cents to $901 an ounce.
COPPER: Bearish economic data pressured futures, as did profit taking and weaker crude-oil prices. Nearby January Comex copper fell 9.7 cents per pound to $3.22.
